First BanCorp. Announces Earnings for the Quarter and Year Ended
December 31, 2016

2016 Fourth Quarter Highlights and Comparison with Third Quarter

Net income of $23.9 million, or $0.11 per diluted share, compared to
$24.1 million, or $0.11 per diluted share, for the third quarter of
2016.

Net interest income increased by $2.9 million to $121.1 million,
compared to $118.2 million for the third quarter of 2016, primarily
due to interest income recovery from certain non-accrual commercial
loans that were fully paid off during the fourth quarter and the
maturity of certain high cost repurchase agreements.

Net interest margin increased 24 basis points to 4.30%.

Provision for loan and lease losses increased by $1.7 million to $23.2
million, compared to $21.5 million for the third quarter of 2016,
primarily reflecting a $1.8 million charge related to the sale of a
$16.3 million pool of non-performing assets in the fourth quarter of
2016, mostly comprised of non-performing commercial loans, as further
discussed below.

Non-interest income of $23.6 million compared to $26.1 million for the
third quarter of 2016, a decrease driven by the effect in the previous
quarter of a $6.1 million gain on sales of U.S. agency mortgage-backed
securities (“MBS”), partially offset by a $1.7 million increase in
brokerage and insurance commissions and a $1.5 million gain from
recovery of a residual private label collateralized mortgage
obligation (“CMO”) previously written off.

Non-interest expenses decreased by $4.1 million to $84.2 million,
compared to $88.3 million for the third quarter of 2016, primarily due
to lower costs associated with credit card and deposit reward programs.

Income tax expense of $13.3 million compared to $10.4 million for the
third quarter of 2016, an increase mainly driven by a higher than
expected proportion of income from taxable sources compared to income
from exempt sources.

Credit quality variances:

Non-performing assets decreased in the quarter by $9.5 million, to
$734.5 million as of December 31, 2016, mainly attributable to the
sale of the $16.3 million pool of non-performing assets as well as
commercial loan charge-offs and collections, partially offset by
non-performing loan inflows in the quarter.

Non-performing loan inflows amounted to $67.9 million, an increase
of $17.5 million, compared to inflows of $50.4 million in the
third quarter of 2016.

A net charge-off rate of 1.43% (1.22% excluding net charge-offs
associated with the sale of the $16.3 million pool of
non-performing assets) compared to 1.90% for the third quarter of
2016. The decrease reflects the impact of four large commercial
loan charge-offs recorded in the previous quarter totaling $22.9
million.

Total deposits, excluding brokered certificates of deposit (“CDs”) and
government deposits, increased in the quarter by $29.5 million to $6.8
billion as of December 31, 2016, reflecting increases of $30.3 million
and $16.9 million in the Puerto Rico and the Virgin Islands regions,
respectively, partially offset by a $17.7 million reduction in the
Florida region.

Brokered CDs decreased in the quarter by $118.8 million to $1.4
billion as of December 31, 2016.

Government deposits decreased in the quarter by $60.8 million to
$563.7 million as of December 31, 2016, a decrease primarily reflected
in the Puerto Rico region.

Total loans increased in the quarter by $16.4 million to $8.9 billion
as of December 31, 2016, primarily due to a $75.4 million growth in
the Florida region reflected in all major loan categories and a $16.4
million increase in the Virgin Islands, partially offset by lower loan
balances in Puerto Rico including the effect of the sale of the $16.3
million pool of non-performing assets completed in the fourth quarter.

Total loan originations, including refinancings, renewals and draws
from existing commitments (excluding credit card utilization
activity), of $757.1 million for the fourth quarter of 2016, compared
to $803.6 million for the third quarter of 2016.

As of December 31, 2016, the Corporation had $323.3 million of direct
exposure to loans and obligations of the Commonwealth of Puerto Rico
government and instrumentalities, of which $191.9 million, or 59%,
represented exposure to municipalities, which is supported by assigned
property tax revenues, compared to total exposure of $325.9 million as
of September 30, 2016.

Total capital, common equity Tier 1 capital, Tier 1 capital, and
leverage ratios calculated under the transition provisions of Basel
III rules of 21.37%, 17.77%, 17.77%, and 13.70%, respectively, as of
December 31, 2016. Tangible common equity ratio of 14.34% as of
December 31, 2016.

January 26, 2017 07:00 AM Eastern Daylight Time

SAN JUAN, Puerto Rico--(EON: Enhanced Online News)--First BanCorp. (the “Corporation”) (NYSE: FBP), the bank holding company
for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported
net income of $23.9 million for the fourth quarter of 2016, or $0.11 per
diluted share, compared to $24.1 million, or $0.11 per diluted share,
for the third quarter of 2016 and $15.0 million, or $0.07 per diluted
share, for the fourth quarter of 2015.

“Basis of Presentation – Use
of Non-GAAP Financial Measures”

For the year ended December 31, 2016, the Corporation reported net
income of $93.2 million, or $0.43 per diluted share, compared to $21.3
million, or $0.10 per diluted share, for the year ended December 31,
2015.

The financial results for 2016 and 2015 included the following items
that management believes are not reflective of core operating
performance, are not expected to reoccur with any regularity or may
reoccur at uncertain times and in uncertain amounts:

Year ended December 31, 2016 and interim periods

Charge to the provision for loan and lease losses of $1.8 million
($1.1 million after-tax) related to the sale of the $16.3 million pool
of non-performing assets in the fourth quarter of 2016, mostly
comprised of non-performing commercial loans.

Gain of $1.5 million ($1.2 million after-tax) from recovery of a
residual CMO previously written off once the trust was liquidated in
the fourth quarter of 2016.

Brokerage and insurance commissions of $1.7 million ($1.0 million
after-tax) net of incentive costs, recorded in the fourth quarter of
2016, primarily from the sale of large fixed annuities contracts.

Adjustment of $2.7 million ($1.7 million after-tax) recorded in the
fourth quarter of 2016 to reduce the credit card rewards program
liability due to the expiration of reward points earned by customers
up to September 2013 (the conversion date of the credit card portfolio
acquired from FIA in May 2012). Refer to the Non-Interest Expenses
discussion below for additional information.

Costs of $0.6 million associated with the secondary offering of the
Corporation’s common stock by certain of the existing stockholders.
The costs, incurred at the holding company level, had no effect on the
income tax expense in 2016.

Gain of $6.1 million ($5.9 million after-tax) on sales of $198.7
million of U.S. agency MBS that carried an average yield of 2.36%
recorded in the third quarter of 2016.

Severance payments of $0.3 million ($0.2 million after-tax) related to
permanent job discontinuance recorded in the third quarter of 2016.

Other-than-temporary impairment (“OTTI”) charges on debt securities,
primarily on Puerto Rico Government debt securities, of $6.7 million
recorded in the first quarter of 2016. No tax benefit was recognized
for the OTTI charges.

Gain of $4.2 million on the repurchase and cancellation of $10 million
in trust preferred securities recorded in the first quarter of 2016,
reflected in the statement of income set forth below as “Gain on early
extinguishment of debt.” The gain, realized at the holding company
level, had no effect on the income tax expense in 2016.

Year ended December 31, 2015 and interim periods

Charges of $48.7 million ($29.7 million after-tax) related to a bulk
sale of assets with a carrying value of $150.4 million (the “bulk sale
of assets”) completed in the second quarter of 2015, mostly comprised
of non-performing commercial loans.

OTTI charges on debt securities, primarily on Puerto Rico Government
debt securities, of $3.0 million and $16.5 million for the quarter and
year ended December 31, 2015, respectively. No tax benefit was
recognized for the OTTI charges.

Gain of $7.0 million ($4.3 million after tax) associated with a
long-term strategic marketing alliance entered into during the fourth
quarter of 2015 as part of the sale of the FirstBank Puerto Rico
merchant contracts portfolio.

Costs of $2.2 million ($1.4 million after-tax) related to a voluntary
early retirement program recorded in the fourth quarter of 2015.

Bargain purchase gain of $13.4 million ($8.2 million after-tax) on
assets acquired and liabilities assumed from Doral Bank recorded in
the first quarter of 2015.

Costs of $4.6 million ($2.8 million after-tax) for the year ended
December 31, 2015 related to the conversion of loan and deposit
accounts acquired from Doral Bank to the FirstBank systems.

The following table reconciles for the fourth and third quarters of
2016, the fourth quarter of 2015, and the years ended December 31, 2016
and 2015 the reported net income to adjusted net income, a non-GAAP
financial measure that excludes items that management believes are not
reflective of core operating performance, are not expected to reoccur
with any regularity or may reoccur at uncertain times and in uncertain
amounts:

Quarter Ended

Quarter Ended

Quarter Ended

Year Ended

Year Ended

(In thousands)

December 31, 2016

September 30, 2016

December 31, 2015

December 31, 2016

December 31, 2015

Net income, as reported

$

23,858

$

24,074

$

14,967

$

93,229

$

21,297

Adjustments:

Charge related to sale of the $16.3 million of non-performing assets

1,799

-

-

1,799

-

Charges related to the bulk sale of assets, including transaction
expenses

-

-

-

-

48,667

Gain from recovery of investments previously written off

(1,547

)

-

-

(1,547

)

-

Brokerage and insurance commissions, primarily from sale of large
fixed annuities contracts, net of incentive costs

(1,692

)

-

-

(1,692

)

-

Adjustment to reduce the credit card rewards liability due to
unusually large customer forfeitures

Acquisition and conversion costs of assets acquired and
liabilities assumed from Doral Bank

-

-

-

-

4,646

Income tax impact of adjustments (1)

1,333

76

1,858

1,409

(13,691

)

Adjusted net income

$

21,609

$

18,335(2

)

$

15,096

$

87,711

$

59,231

(1)

See "Basis of Presentation" for the individual tax impact for each
reconciling item.

(2)

Adjusted net income for the third quarter of 2016 does not reflect
an adjustment for a $1.2 million charge to income tax expense that
resulted from the retroactive effect of a higher effective tax
rate related to the results for the first six months of 2016 than
the rate that the Corporation had estimated in the first and
second quarter.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp.,
commented: “We are quite pleased with our results for the fourth quarter
and fiscal year end 2016. Throughout the uncertain macroeconomic
backdrop in Puerto Rico our institution continues to improve performance
metrics and demonstrate improving earnings capabilities. We generated
net income for the fourth quarter of $23.9 million, or $0.11 per diluted
share, and $93.2 million, or $0.43 per diluted share for the year.
Adjusted pre-tax pre-provision income reached $208 million for 2016
and efficiency ratio improved to 62% for the year.

During the fourth quarter, we saw improvement in all of our key
franchise metrics: Our loan portfolio grew $16 million despite the sale
of non-performing assets. Deposits net of government and brokered
increased $29 million, while reducing reliance on brokered CDs by $119
million. We were able to expand our net interest margin to 4.30% and
further reduce our expense base. Our nonperforming assets declined
slightly by $9.5 million compared to the prior quarter. We continue to
experience some migration into nonperforming assets but remain diligent
in our efforts to reduce these.

The involvement of the US Congress, the recently approved PROMESA law
and the change in administration in Puerto Rico are viewed as drivers
for improved fiscal governance, debt balancing and economic stability.
Our Puerto Rico government exposure declined slightly and we remain
encouraged and focused on achieving the resolution to our nonperforming
Puerto Rico government exposures.

On the capital front, during the course of 2016 we repurchased a small
portion of our trust preferred securities; we brought current the
accrued and unpaid interest on our trust preferred securities; we
successfully completed a secondary offering; and we reinstated the
dividends on our preferred stock. Our turnaround story is well underway
and our leadership team is committed to continue enhancing shareholder
value as we navigate through the Puerto Rico economic turnaround.”

This press release includes certain non-GAAP financial measures,
including adjusted net income, adjusted provision for loan and lease
losses, adjusted net charge-offs, adjusted non-interest income, adjusted
non-interest expenses, adjusted pre-tax, pre-provision income, adjusted
net interest income and margin, certain capital ratios, and certain
other financial measures that exclude the effect of items that
management believes are not reflective of core operating performance,
are not expected to reoccur with any regularity or may reoccur at
uncertain times and in uncertain amounts, and should be read in
conjunction with the discussion below in “Basis of Presentation – Use
of Non-GAAP Financial Measures” and the accompanying tables (Exhibit
A), which are an integral part of this press release.

INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX,
PRE-PROVISION INCOME

Income before income taxes for the fourth quarter of 2016 amounted to
$37.2 million compared to $34.5 million for the third quarter of 2016.
The following table reconciles income before income taxes to adjusted
pre-tax, pre-provision income for the last five quarters. Adjusted
pre-tax, pre-provision income for the fourth quarter of 2016 amounted to
$55.0 million, up $4.8 million from the third quarter of 2016:

Less: Adjustment to reduce the credit card rewards liability due
to unusually large customer forfeitures

(2,732

)

-

-

-

-

Add: Secondary offering costs

590

-

-

-

-

Add: Severance payments on job discontinuance

-

281

-

-

-

Less: Gain on early extinguishment of debt

-

-

-

(4,217

)

-

Less: Gain on sale of merchant contracts

-

-

-

-

(7,000

)

Add: Voluntary early retirement program expenses

-

-

-

-

2,238

Adjusted pre-tax, pre-provision income (1)

$

55,007

$

50,201

$

50,464

$

52,586

$

50,631

Change from most recent prior quarter (amount)

$

4,806

$

(263

)

$

(2,122

)

$

1,955

$

134

Change from most recent prior quarter (percentage)

9.6

%

-0.5

%

-4.0

%

3.9

%

0.3

%

(1) See "Basis of Presentation" for definition.

Adjusted pre-tax, pre-provision income is a non-GAAP financial measure
that management believes is useful to investors in analyzing the
Corporation’s performance and trends. This metric is income before
income taxes adjusted to exclude the provision for loan and lease
losses, gains or losses on sales of investment securities and
impairments, and fair value adjustments on derivatives. In addition,
from time to time, earnings are adjusted also for items that management
believes are not reflective of core operating performance, are not
expected to reoccur with any regularity or may reoccur at uncertain
times and in uncertain amounts (for additional information about this
non-GAAP financial measure, see Basis of Presentation - Adjusted
Pre-Tax, Pre-Provision Income).

NET INTEREST INCOME

Net interest income, excluding fair value adjustments on derivatives
(“valuations”), and net interest income on a tax-equivalent basis are
non-GAAP financial measures. See Basis of Presentation – Net Interest
Income, Excluding Valuations, and on a Tax-Equivalent Basisbelow
for additional information. The following table reconciles net
interest income in accordance with GAAP to net interest income excluding
valuations, and net interest income on a tax-equivalent basis for the
last five quarters. The table also reconciles netinterest spread
and net interest margin on a GAAP basis to these items excluding
valuations, and on a tax-equivalent basis.

(Dollars in thousands)

Quarter Ended

December 31, 2016

September 30, 2016

June 30, 2016

March 31, 2016

December 31, 2015

Net Interest Income

Interest income - GAAP

$

143,954

$

143,573

$

146,934

$

150,831

$

151,640

Unrealized (gain) loss on derivative instruments

(1

)

(5

)

2

4

5

Interest income excluding valuations

143,953

143,568

146,936

150,835

151,645

Tax-equivalent adjustment

2,492

2,483

3,502

4,791

4,915

Interest income on a tax-equivalent basis excluding valuations

$

146,445

$

146,051

$

150,438

$

155,626

$

156,560

Interest expense - GAAP

22,890

25,395

26,706

26,183

26,427

Net interest income - GAAP

$

121,064

$

118,178

$

120,228

$

124,648

$

125,213

Net interest income excluding valuations

$

121,063

$

118,173

$

120,230

$

124,652

$

125,218

Net interest income on a tax-equivalent basis and excluding
valuations

$

123,555

$

120,656

$

123,732

$

129,443

$

130,133

Average Balances

Loans and leases

$

8,860,094

$

8,834,838

$

8,883,922

$

9,009,400

$

9,093,238

Total securities, other short-term investments and interest-bearing
cash balances

2,346,243

2,739,017

3,170,068

2,973,102

3,109,055

Average interest-earning assets

$

11,206,337

$

11,573,855

$

12,053,990

$

11,982,502

$

12,202,293

Average interest-bearing liabilities

$

8,465,415

$

8,914,961

$

9,408,464

$

9,396,257

$

9,663,626

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.11

%

4.94

%

4.90

%

5.06

%

4.93

%

Average rate on interest-bearing liabilities - GAAP

1.08

%

1.13

%

1.14

%

1.12

%

1.08

%

Net interest spread - GAAP

4.03

%

3.81

%

3.76

%

3.94

%

3.85

%

Net interest margin - GAAP

4.30

%

4.06

%

4.01

%

4.18

%

4.07

%

Average yield on interest-earning assets excluding valuations

5.11

%

4.93

%

4.90

%

5.06

%

4.93

%

Average rate on interest-bearing liabilities excluding valuations

1.08

%

1.13

%

1.14

%

1.12

%

1.08

%

Net interest spread excluding valuations

4.03

%

3.80

%

3.76

%

3.94

%

3.85

%

Net interest margin excluding valuations

4.30

%

4.06

%

4.01

%

4.18

%

4.07

%

Average yield on interest-earning assets on a tax-equivalent basis
and excluding valuations

5.20

%

5.02

%

5.02

%

5.22

%

5.09

%

Average rate on interest-bearing liabilities excluding valuations

1.08

%

1.13

%

1.14

%

1.12

%

1.08

%

Net interest spread on a tax-equivalent basis and excluding
valuations

4.12

%

3.89

%

3.88

%

4.10

%

4.01

%

Net interest margin on a tax-equivalent basis and excluding
valuations

4.39

%

4.15

%

4.13

%

4.34

%

4.23

%

Net interest income for the fourth quarter of 2016 amounted to $121.1
million, an increase of $2.9 million when compared to net interest
income of $118.2 million for the third quarter of 2016. The increase in
net interest income was mainly due to:

A $1.7 million increase in interest income on loans mainly due to the
recovery of interest income of approximately $1.6 million on certain
commercial non-performing loans that were fully paid off in the fourth
quarter.

A $1.1 million increase in net interest income resulting from the use
of proceeds from sales of U.S. agency MBS and cash balances deposited
in the Federal Reserve Bank to repay maturing repurchase agreements
and brokered CDs in the fourth quarter. The Corporation repaid in the
fourth quarter $300 million of repurchase agreements that carried an
average cost of 3.63%. In addition, the average balance of brokered
CDs decreased by $167.9 million to $1.5 billion in the fourth quarter.
The average all-in cost of the $349.8 million brokered CDs that
matured in the fourth quarter was 0.99%.

A $0.45 million increase in interest income associated with a lower
U.S. agency MBS premium amortization expense. The fourth quarter U.S.
agency MBS prepayments decreased to $61.5 million compared to $68.5
million in the third quarter.

Partially offset by:

A $0.3 million decrease in interest income associated with the full
quarter impact of the discontinuance of interest income recognition on
bonds of the Government Development Bank for Puerto Rico (“GDB”) and
the Puerto Rico Public Buildings Authority that were placed in
non-performing status during the third quarter of 2016.

Net interest margin was 4.30%, up 24 basis points from the third quarter
of 2016. The increase was primarily driven by the aforementioned use of
cash balances and proceeds from sales of U.S. agency MBS to repay
certain high-cost maturing repurchase agreements and brokered CDs, the
recovery of interest income on certain non-performing commercial loans
that were fully paid off in the fourth quarter, and the change in mix of
earning assets. Loans increased as a percentage of interest-earning
assets from 76.3% in the third quarter of 2016 to 79.1% in the fourth
quarter of 2016.

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses for the fourth quarter of 2016
was $23.2 million compared to $21.5 million for the third quarter of
2016, an increase driven by the $1.8 million charge to the provision
related to the sale of the $16.3 million pool of non-performing assets
in the fourth quarter of 2016.

During the fourth quarter of 2016 the Corporation completed the sale of
a pool of non-performing assets, primarily comprised of non-performing
commercial loans, with a book value of $16.3 million (principal balance
of $19.5 million), in a cash transaction. The proceeds from this sale
were $11.7 million. Approximately $2.8 million of reserves had been
allocated to the loans. This transaction resulted in total net
charge-offs of $4.6 million and an incremental pre-tax loss of $1.8
million recorded as a charge to the provision for loan and lease losses.

Excluding the $1.8 million charge related to the sale of the $16.3
million pool of non-performing assets, the adjusted provision of $21.4
million for the fourth quarter of 2016 decreased $0.1 million compared
to the provision for loan and lease losses of $21.5 million for the
third quarter of 2016. The $0.1 million decrease in the adjusted
provision for loan and lease losses was driven by the following
variances:

A $1.1 million decrease in the provision for residential mortgage
loans primarily reflecting a lower level of charge-offs and a decrease
in the migration of loans to late stages of delinquency.

A $0.3 million decrease in the adjusted provision for commercial and
construction loans mainly due to a $3.6 million decrease in the
provision for impaired construction loans in the Virgin Islands,
partially offset by the impact in the previous quarter of reserve
releases related to upgrades in the classification of certain
commercial loans.

Partially offset by:

A $1.3 million increase in the provision for consumer loans reflecting
higher provisions for auto loans, credit cards and small loans.

See Credit Quality below for additional information regarding the
allowance for loan and lease losses, including variances in net
charge-offs.

NON-INTEREST INCOME

Quarter Ended

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands)

2016

2016

2016

2016

2015

Service charges on deposit accounts

$

5,759

$

5,788

$

5,618

$

5,800

$

5,474

Mortgage banking activities

5,304

5,485

4,893

4,753

4,566

Net gain (loss) on investments and impairments

1,547

6,096

-

(6,679

)

(3,033

)

Gain on early extinguishment of debt

-

-

-

4,217

-

Gain on sale of merchant contracts

-

-

-

-

7,000

Other operating income

10,951

8,777

9,267

10,378

9,161

Non-interest income

$

23,561

$

26,146

$

19,778

$

18,469

$

23,168

Non-interest income for the fourth quarter of 2016 amounted to $23.6
million, compared to $26.1 million for the third quarter of 2016. The
$2.6 million decrease was primarily related to the effect in the third
quarter of the $6.1 million gain on sales of U.S. agency MBS, partially
offset by a $1.7 million increase in brokerage and insurance
commissions, primarily related to the sale of large fixed annuities
contracts, and a $1.5 million gain recorded in the fourth quarter from
the recovery of a residual CMO previously written off.

On a non-GAAP basis, excluding the effect of the aforementioned items,
the adjusted non-interest income of $20.2 million for the fourth quarter
of 2016 increased $0.2 million compared to adjusted non-interest income
of $20.0 million for the third quarter of 2016. The $0.2 million
increase in adjusted non-interest income was primarily due to:

A $0.4 million increase in income from debit card interchange fees and
ATM fees. Higher interchange fees are closely related to seasonality,
while the increase in ATM fees reflects both changes in the fee
structure and the expansion of the Bank’s automatic teller network
with a total of 80 new locations.

Partially offset by:

A $0.2 million decrease in revenues from the mortgage banking business
driven by a $0.4 million decrease in gains on sales of residential
mortgage loans in the secondary market to Fannie Mae and Freddie Mac,
partially offset by the impact in the previous quarter of a $0.3
million increase to the valuation allowance related to servicing
assets. Also, gains on sales of residential mortgage loans to Ginnie
Mae decreased by $2.3 million due to higher market interest rates,
partially offset by a $2.2 million increase in realized and unrealized
gains on TBAs MBS forward contracts. Total loans sold in the secondary
market to U.S. government-sponsored entities amounted to $135.5
million with a related gain of $1.9 million in the fourth quarter of
2016, compared to $127.9 million with a related gain of $4.6 million
in the third quarter of 2016.

NON-INTEREST EXPENSES

Quarter Ended

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands)

2016

2016

2016

2016

2015

Employees' compensation and benefits

$

37,652

$

38,005

$

37,401

$

38,435

$

39,176

Occupancy and equipment

14,045

13,888

13,043

14,183

14,639

Deposit insurance premium

3,920

4,333

5,742

6,060

7,484

Other insurance and supervisory fees

987

1,271

1,324

1,283

1,291

Taxes, other than income taxes

3,664

3,927

3,756

3,792

3,472

Professional fees:

Collections, appraisals and other credit related fees

2,344

2,267

2,898

2,381

3,340

Outsourcing technology services

5,435

5,124

4,937

4,768

4,505

Other professional fees

3,583

3,281

3,492

3,627

2,855

Credit and debit card processing expenses

3,533

3,546

3,274

3,282

3,992

Business promotion

199

3,169

4,048

4,003

4,335

Communications

1,515

1,711

1,725

1,808

1,884

Net loss on OREO operations

2,399

2,603

3,325

3,206

3,941

Other

4,960

5,178

4,579

6,169

5,112

Total

$

84,236

$

88,303

$

89,544

$

92,997

$

96,026

Non-interest expenses in the fourth quarter of 2016 amounted to $84.2
million, a decrease of $4.1 million from $88.3 million in the third
quarter of 2016. The decrease includes the effect of a $2.7 million
adjustment recorded in the fourth quarter to reduce the credit card
rewards liability due to the expiration of reward points earned by
customers up to September 2013 (the conversion date of the credit card
portfolio acquired from FIA in May 2012). Most of these points had been
accrued at acquisition date and ultimately experienced a redemption
pattern materially different from those points accrued after conversion.
The variance also includes the effect of costs of $0.6 million
associated with the secondary offering of the Corporation’s common stock
by certain of the existing stockholders, and the impact in the previous
quarter of $0.3 million of severance payments related to permanent job
discontinuance.

On a non-GAAP basis, excluding the effect of the aforementioned items,
the adjusted non-interest expenses of $86.3 million for the fourth
quarter of 2016 decreased $1.7 million compared to adjusted non-interest
expenses of $88.0 million for the third quarter of 2016. The $1.7
million decrease in adjusted non-interest expenses was primarily due to:

A $1.4 million decrease in the provision for unfunded loan commitments
and letters of credit, included as part of “Other” in the table above,
primarily related to a floor plan revolving credit facility.

A $0.4 million decrease in the FDIC insurance premium expense
reflecting, among other things, the effect of an improved earnings
trend as well as the effect of reductions in brokered deposits and
average assets.

A $0.3 million decrease in local regulatory supervisory fees, included
as part of “Other insurance and supervisory fees” in the table above,
tied to the overall decrease in total assets.

A $0.3 million decrease in adjusted business promotion expenses,
driven by a $0.8 million adjustment associated with the reduction in
value assigned to each point of a deposit account rewards program,
partially offset by higher marketing expenses in the fourth quarter.

A $0.2 million decrease in losses on OREO operations, primarily
related to lower write-downs to the value of OREO properties.

Partially offset by:

A $0.6 million increase in legal reserves, included as part of “Other”
in the table above, mainly related to labor-related cases.

A $0.2 million increase in adjusted total professional service fees,
primarily associated with consulting services to assess several
technology systems.

INCOME TAXES

The Corporation recorded an income tax expense for the fourth quarter of
2016 of $13.3 million compared to $10.4 million for the third quarter of
2016. The increase in the income tax expense for the fourth quarter was
driven by a higher than expected proportion of income from taxable
sources compared to income from exempt sources. As of December 31, 2016,
the Corporation had a net deferred tax asset of $286.3 million (net of a
valuation allowance of $207.2 million, including a valuation allowance
of $171.0 million against the deferred tax assets of the Corporation’s
banking subsidiary, FirstBank).

CREDIT QUALITY

Non-Performing Assets

(Dollars in thousands)

December 31,

September 30,

June 30,

March 31,

December 31,

2016

2016

2016

2016

2015

Non-performing loans held for investment:

Residential mortgage

$

160,867

$

162,201

$

164,399

$

172,890

$

169,001

Commercial mortgage

178,696

191,449

200,376

182,763

51,333

Commercial and Industrial

146,599

137,016

154,405

137,896

137,051

Construction

49,852

50,767

52,549

54,036

54,636

Consumer and Finance leases

24,080

25,279

26,465

27,351

30,752

Total non-performing loans held for investment

560,094

566,712

598,194

574,936

442,773

OREO

137,681

139,446

139,159

142,888

146,801

Other repossessed property

7,300

9,416

10,790

11,339

12,223

Other assets (1)

21,362

20,393

-

-

-

Total non-performing assets, excluding loans held for sale

$

726,437

$

735,967

$

748,143

$

729,163

$

601,797

Non-performing loans held for sale

8,079

8,079

8,079

8,079

8,135

Total non-performing assets, including loans held for sale (2)

$

734,516

$

744,046

$

756,222

$

737,242

$

609,932

Past-due loans 90 days and still accruing (3)

$

135,808

$

138,442

$

143,811

$

184,890

$

163,197

Non-performing loans held for investment to total loans held for
investment

6.30

%

6.39

%

6.74

%

6.41

%

4.86

%

Non-performing loans to total loans

6.36

%

6.44

%

6.81

%

6.47

%

4.93

%

Non-performing assets, excluding non-performing loans held for
sale, to total assets, excluding non-performing loans held for sale

6.10

%

6.10

%

5.98

%

5.74

%

4.79

%

Non-performing assets to total assets

6.16

%

6.16

%

6.05

%

5.80

%

4.85

%

(1)

Bonds of the Government Development Bank for Puerto Rico ("GDB")
and the Puerto Rico Public Buildings Authority held as part of the
available-for-sale investment securities portfolio with an
amortized cost of $35.6 million, including accrued interest of
$0.9 million, recorded on the Corporation's books at their
aggregate fair value of $20.5 million (September 30, 2016 - $19.5
million).

(2)

Purchased credit impaired ("PCI") loans of $165.8 million
accounted for under ASC 310-30 as of December 31, 2016, primarily
mortgage loans acquired from Doral Bank in the first quarter of
2015 and from Doral Financial in the second quarter of 2014, are
excluded and not considered non-performing due to the application
of the accretion method, under which these loans will accrete
interest income over the remaining life of the loans using
estimated cash flow analysis.

(3)

Amount includes PCI loans with individual delinquencies over 90
days and still accruing with a carrying value as of December 31,
2016 of approximately $29.0 million, primarily related to the
loans acquired from Doral Bank in the first quarter of 2015 and
from Doral Financial in the second quarter of 2014.

Variances in credit quality metrics:

Total non-performing assets decreased by $9.5 million to $734.5
million as of December 31, 2016, compared to $744.0 million as of
September 30, 2016. Total non-performing loans, including
non-performing loans held for sale, decreased by $6.6 million from
$574.8 million as of the end of the third quarter of 2016 to $568.2
million as of December 31, 2016. The decrease in non-performing assets
was primarily attributable to the aforementioned sale of the $16.3
million pool of non-performing assets, primarily non-performing
commercial loans, as well as commercial loan charge-offs and
collections, partially offset by non-performing loan inflows in the
quarter.

Inflows to non-performing loans held for investment were $67.9
million, an increase of $17.5 million, compared to inflows of $50.4
million in the third quarter of 2016. The increase was driven by the
inflow of a $33.7 million commercial and industrial loan in the Puerto
Rico region. Inflows to non-performing commercial and construction
loans increased by $24.3 million to $37.3 million during the fourth
quarter compared to $13.0 million in the third quarter of 2016. Higher
inflows in the commercial and construction portfolios were partially
offset by a $5.5 million decrease in inflows of non-performing
residential mortgage loans and a $1.4 million decrease in inflows of
non-performing consumer loans.

Adversely classified commercial and construction loans held for
investment decreased by $57.3 million to $489.4 million as of December
31, 2016.

The OREO balance decreased by $1.8 million, driven by sales of $7.9
million and adjustments to the OREO value of $3.9 million, partially
offset by additions of $10.0 million in the fourth quarter, primarily
residential properties in Puerto Rico.

Total troubled debt restructuring (“TDR”) loans held for investment
were $647.0 million as of December 31, 2016, down $9.3 million from
September 30, 2016. Approximately $384.9 million of total TDR loans
held for investment were in accrual status as of December 31, 2016.

Allowance for Loan and Lease Losses

The following table sets forth information concerning the allowance for
loan and lease losses during the periods indicated:

Quarter Ended

(Dollars in thousands)

December 31,

September 30,

June 30,

March 31,

December 31,

2016

2016

2016

2016

2015

Allowance for loan and lease losses, beginning of period

$

214,070

$

234,454

$

238,125

$

240,710

$

228,966

Provision for loan and lease losses

23,191

(1)

21,503

20,986

21,053

33,633

Net (charge-offs) recoveries of loans:

Residential mortgage

(5,487

)

(7,542

)

(10,691

)

(6,960

)

(4,877

)

Commercial mortgage

(4,310

)

(2)

(13,395

)

(1,404

)

(529

)

(1,967

)

Commercial and Industrial

(9,515

)

(3)

(9,658

)

(1,238

)

(3,479

)

(2,824

)

Construction

(1,132

)

121

(369

)

(74

)

(4

)

Consumer and finance leases

(11,214

)

(11,413

)

(10,955

)

(12,596

)

(12,217

)

Net charge-offs

(31,658

)

(4)

(41,887

)

(24,657

)

(23,638

)

(21,889

)

Allowance for loan and lease losses, end of period

$

205,603

$

214,070

$

234,454

$

238,125

$

240,710

Allowance for loan and lease losses to period end total loans held
for investment

2.31

%

2.42

%

2.64

%

2.65

%

2.64

%

Net charge-offs (annualized) to average loans outstanding during the
period

1.43

%

1.90

%

1.11

%

1.05

%

0.96

%

Net charge-offs (annualized), excluding charge-offs of $4.6
million related to the sale of the $16.3 million pool of
non-performing assets in the fourth quarter of 2016, to average
loans outstanding during the period

1.22

%

1.90

%

1.11

%

1.05

%

0.96

%

Provision for loan and lease losses to net charge-offs during the
period

0.73x

0.51x

0.85x

0.89x

1.54x

Provision for loan and lease losses to net charge-offs during the
period, excluding impact of the sale of the $16.3 million pool of
non-performing assets in the fourth quarter of 2016

0.79x

0.51x

0.85x

0.89x

1.54x

(1)

Includes provision of $1.8 million associated with the sale of the
$16.3 million pool of non-performing assets.

(2)

Includes net charge-offs totaling $3.0 million associated with the
sale of the $16.3 million pool of non-performing assets.

(3)

Includes net charge-offs totaling $1.6 million associated with the
sale of the $16.3 million pool of non-performing assets.

(4)

Includes net charge-offs totaling $4.6 million associated with the
sale of the $16.3 million pool of non-performing assets.

The ratio of the allowance for loan and lease losses to total loans
held for investment decreased to 2.31% as of December 31, 2016
compared to 2.42% as of September 30, 2016, primarily due to
charge-offs on impaired commercial loans and loans included in the
sale of non-performing assets recorded in the fourth quarter against
previously-established specific reserves. The ratio of the total
allowance to non-performing loans held for investment was 36.71% as of
December 31, 2016 compared to 37.77% as of September 30, 2016.

The following table sets forth information concerning the composition of
the Corporation’s allowance for loan and lease losses as of December 31,
2016 and September 30, 2016 by loan category and by whether the
allowance and related provisions were calculated individually for
impairment purposes or through a general valuation allowance:

Commercial Loans

(including Commercial

Residential

Mortgage, C&I, and

Consumer and

(Dollars in thousands)

Mortgage Loans

Construction)

Finance Leases

Total

As of December 31, 2016

Impaired loans:

Principal balance of loans, net of charge-offs

$

442,267

$

401,225

$

44,413

$

887,905

Allowance for loan and lease losses

8,633

50,215

5,573

64,421

Allowance for loan and lease losses to principal balance

1.95

%

12.52

%

12.55

%

7.26

%

PCI loans:

Carrying value of PCI loans

162,676

3,142

-

165,818

Allowance for PCI loans

6,638

219

-

6,857

Allowance for PCI loans to carrying value

4.08

%

6.97

%

-

4.14

%

Loans with general allowance:

Principal balance of loans

2,691,088

3,469,847

1,672,215

7,833,150

Allowance for loan and lease losses

18,709

71,342

44,274

134,325

Allowance for loan and lease losses to principal balance

0.70

%

2.06

%

2.65

%

1.71

%

Total loans held for investment:

Principal balance of loans

$

3,296,031

$

3,874,214

$

1,716,628

$

8,886,873

Allowance for loan and lease losses

33,980

121,776

49,847

205,603

Allowance for loan and lease losses to principal balance

1.03

%

3.14

%

2.90

%

2.31

%

As of September 30, 2016

Impaired loans:

Principal balance of loans, net of charge-offs

$

444,039

$

424,381

$

44,434

$

912,854

Allowance for loan and lease losses

9,667

57,579

5,436

72,682

Allowance for loan and lease losses to principal balance

2.18

%

13.57

%

12.23

%

7.96

%

PCI loans:

Carrying value of PCI loans

165,014

3,127

-

168,141

Allowance for PCI loans

6,638

219

-

6,857

Allowance for PCI loans to carrying value

4.02

%

7.00

%

-

4.08

%

Loans with general allowance:

Principal balance of loans

2,690,889

3,408,815

1,682,955

7,782,659

Allowance for loan and lease losses

19,661

69,530

45,340

134,531

Allowance for loan and lease losses to principal balance

0.73

%

2.04

%

2.69

%

1.73

%

Total loans held for investment:

Principal balance of loans

$

3,299,942

$

3,836,323

$

1,727,389

$

8,863,654

Allowance for loan and lease losses

35,966

127,328

50,776

214,070

Allowance for loan and lease losses to principal balance

1.09

%

3.32

%

2.94

%

2.42

%

Net Charge-Offs

The following table presents annualized net charge-offs to average loans
held-in-portfolio:

Quarter Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2016

2016

2016

2016

2015

Residential mortgage

0.67

%

0.91

%

1.29

%

0.84

%

0.59

%

Commercial mortgage

1.11

%

(1)

3.49

%

0.37

%

0.14

%

0.51

%

Commercial and Industrial

1.75

%

(2)

1.81

%

0.23

%

0.64

%

0.51

%

Construction

3.36

%

-0.36

%

1.02

%

0.18

%

0.01

%

Consumer and finance leases

2.61

%

2.63

%

2.48

%

2.79

%

2.65

%

Total loans

1.43

%

(3)

1.90

%

1.11

%

1.05

%

0.96

%

(1)

Includes net charge-offs totaling $3.0 million associated with the
sale of the $16.3 million pool of non-performing assets. The ratio
of commercial mortgage net charge-offs to average loans, excluding
charge-offs associated with the sale of the $16.3 million pool of
non-performing assets, was 0.33%.

(2)

Includes net charge-offs totaling $1.6 million associated with the
sale of the $16.3 million pool of non-performing assets. The ratio
of commercial and industrial net charge-offs to average loans,
excluding charge-offs associated with the sale of the $16.3
million pool of non-performing assets, was 1.46%.

(3)

Includes net charge-offs totaling $4.6 million associated with the
sale of the $16.3 million pool of non-performing assets. The ratio
of total charge-offs to average loans, excluding charge-offs
associated with the sale of the $16.3 million pool of
non-performing assets, was 1.22%.

The ratios above are based on annualized net charge-offs and are not
necessarily indicative of the results expected in subsequent periods.

Net charge-offs for the fourth quarter of 2016 were $31.7 million, or an
annualized 1.43% of average loans, compared to $41.9 million, or an
annualized 1.90% of average loans, in the third quarter of 2016. Net
charge-offs in the fourth quarter included $4.6 million associated with
the sale of the $16.3 million pool of non-performing assets. Excluding
the impact of net charge-offs related to the sale of the $16.3 million
pool of non-performing assets, adjusted total net charge-offs in the
fourth quarter of 2016 were $27.0 million, or an annualized 1.22% of
average loans, a decrease of $14.9 million compared to the third quarter
of 2016. The decrease of $14.9 million in adjusted net charge-offs was
mainly related to:

A $12.6 million decrease in commercial and construction loan adjusted
net charge-offs, primarily related to the impact in the previous
quarter of charge-offs of $13.7 million associated with two of the
three facilities guaranteed by the Puerto Rico Tourism Development
Fund (“TDF”).

A $2.1 million decrease in residential mortgage loan net charge-offs,
primarily related to loans evaluated for impairment based on
delinquency and loan-to-value levels.

Total assets were approximately $11.9 billion as of December 31, 2016,
down $152.8 million from September 30, 2016.

The decrease was mainly due to:

A $229.3 million decrease in cash and cash equivalents primarily
related to liquidity used to repay maturing brokered CDs and
repurchase agreements, and the purchase of investments securities, as
further explained below.

Partially offset by:

A $52.3 million increase in investment securities driven by:

Purchases of approximately $199.1 million of securities issued by
U.S. agencies with an aggregate average yield of 2.56%, including:
(i) $193.5 million of U.S. agencies MBS and (ii) $5.6 million of
U.S. agencies callable debentures.

A $14.2 million increase in FHLB stock.

Partially
offset by:

Prepayments of approximately $61.5 million of U.S. agencies MBS.

The maturity or call prior to the scheduled maturity of $54.6
million of U.S. agencies debt securities.

A $38.8 million decrease in the fair value of investment
securities available for sale.

A $16.4 million increase in total loans, primarily due to a growth of
$75.4 million in the Florida region reflected in all major loan
categories and a $16.4 million increase in the Virgin Islands region
particularly related to loans granted to government entities. The
aforementioned increases were partially offset by a $75.3 million
decrease in the Puerto Rico region, reflecting a $30.4 million
decrease in commercial and construction loans that was driven by the
sale of non-performing loans and charge-offs, a $30.4 million decrease
in residential mortgage loans, and a $14.5 million decrease in
consumer loans. The allowance for loan and lease losses decreased $8.5
million to $205.6 million as of December 31, 2016 from $214.1 million
as of the end of the third quarter of 2016.

Total loan
originations, including refinancings, renewals, and draws from
existing revolving and non-revolving commitments, amounted to
approximately $757.1 million, compared to $803.6 million in the third
quarter of 2016. These figures exclude the credit card utilization
activity. Commercial and construction loan originations decreased by
$46.9 million to $418.7 million in the fourth quarter of 2016 from
$465.6 million in the third quarter of 2016. Consumer loan
originations increased by $6.0 million to $144.9 million in the fourth
quarter of 2016 compared to $138.9 million in the third quarter of
2016. Residential mortgage loan originations and purchases decreased
by $5.7 million to $193.5 million in the fourth quarter of 2016
compared to $199.1 million in the third quarter of 2016.

Total liabilities were approximately $10.1 billion as of December 31,
2016, down $139.2 million from September 30, 2016.

The decrease was mainly due to:

The repayment at maturity of $300 million of repurchase agreements
that carried an average cost of 3.63%.

A $118.8 million decrease in brokered CDs. The Corporation redeemed in
the fourth quarter approximately $349.8 million of maturing brokered
CDs with an all-in cost of 0.99%, partially offset by issuances of
brokered CDs of approximately $231.0 million with an all-in cost of
1.31%.

A $60.8 million decrease in government deposits, including decreases
of $54.6 million and $6.2 million in the Puerto Rico and the Virgin
Islands regions, respectively.

Partially offset by:

A $315.0 million increase in FHLB advances, including new 2-3 Year
FHLB advances totaling $145.0 million with an average cost of 1.69%
and short-term FHLB advances totaling $170.0 million maturing in
January 2017.

A $29.5 million increase in deposits, excluding government deposits
and brokered CDs, reflecting increases of $30.3 million and $16.9
million in the Puerto Rico and the Virgin Islands regions,
respectively, partially offset by a $17.7 million reduction in the
Florida region.

Total stockholders’ equity amounted to $1.8 billion as of December 31,
2016, a decrease of $13.6 million from September 30, 2016, mainly driven
by:

A decrease of $38.8 million in other comprehensive income mainly
related to the decrease in the fair value of U.S. agency MBS driven by
higher market interest rates.

Partially offset by:

The net income of $23.9 million reported in the fourth quarter.

The Corporation’s common equity tier 1 capital, tier 1 capital, total
capital and leverage ratios under the Basel III rules as of December 31,
2016 were 17.77%, 17.77%, 21.37% and 13.70%, respectively, compared to
common equity tier 1 capital, tier 1 capital, total capital and leverage
ratios of 17.64%, 17.64%, 21.27%, and 13.04%, respectively, as of the
end of the third quarter of 2016. The Corporation paid interest for the
fourth quarter of 2016 on the subordinated debt associated with its
trust preferred securities and paid dividends on its non-cumulative
perpetual monthly income preferred stock in December 2016. As of
December 31, 2016, the Corporation is current on all interest payments
related to its subordinated debt.

Meanwhile, the common equity tier 1 capital, tier 1 capital, total
capital and leverage ratios as of December 31, 2016 of our banking
subsidiary, FirstBank Puerto Rico, were 16.95%, 19.56%, 20.83%, and
15.10%, respectively, compared to common equity tier 1 capital, tier 1
capital, total capital and leverage ratios of 16.83%, 19.46%, 20.73% and
14.40%, respectively, as of the end of the third quarter of 2016.

As previously announced, a secondary offering of the Corporation’s
common stock by certain of the Corporation’s existing stockholders was
completed on December 5, 2016. Funds affiliated with Thomas H. Lee
Partners (“THL”) sold 9 million shares of common stock, and funds
managed by Oaktree Capital Management, L.P. (“Oaktree”) sold 9 million
shares of common stock. In addition, the underwriters exercised their
option to purchase an additional 2.7 million shares of common stock from
the selling stockholders. The Corporation did not receive any proceeds
from the offering. As of December 31, 2016, each of THL and Oaktree owns
14.5% of the Corporation’s common stock.

Tangible Common Equity

The Corporation’s tangible common equity ratio increased to 14.34% as of
December 31, 2016 from 14.27% as of September 30, 2016.

The following table presents a reconciliation of the Corporation’s
tangible common equity and tangible assets over the last five quarters
to the comparable GAAP items:

(In thousands, except ratios and per share information)

December 31,

September 30,

June 30,

March 31,

December 31,

2016

2016

2016

2016

2015

Tangible Equity:

Total equity - GAAP

$

1,786,243

$

1,799,886

$

1,786,453

$

1,749,167

$

1,694,134

Preferred equity

(36,104

)

(36,104

)

(36,104

)

(36,104

)

(36,104

)

Goodwill

(28,098

)

(28,098

)

(28,098

)

(28,098

)

(28,098

)

Purchased credit card relationship intangible

(10,531

)

(11,228

)

(11,925

)

(12,622

)

(13,319

)

Core deposit intangible

(7,198

)

(7,690

)

(8,182

)

(8,674

)

(9,166

)

Insurance customer relationship intangible

(927

)

(965

)

(1,003

)

(1,042

)

-

Tangible common equity

$

1,703,385

$

1,715,801

$

1,701,141

$

1,662,627

$

1,607,447

Tangible Assets:

Total assets - GAAP

$

11,922,455

$

12,075,253

$

12,508,702

$

12,714,370

$

12,573,019

Goodwill

(28,098

)

(28,098

)

(28,098

)

(28,098

)

(28,098

)

Purchased credit card relationship intangible

(10,531

)

(11,228

)

(11,925

)

(12,622

)

(13,319

)

Core deposit intangible

(7,198

)

(7,690

)

(8,182

)

(8,674

)

(9,166

)

Insurance customer relationship intangible

(927

)

(965

)

(1,003

)

(1,042

)

-

Tangible assets

$

11,875,701

$

12,027,272

$

12,459,494

$

12,663,934

$

12,522,436

Common shares outstanding

217,446

217,388

217,129

217,012

215,089

Tangible common equity ratio

14.34

%

14.27

%

13.65

%

13.13

%

12.84

%

Tangible book value per common share

$

7.83

$

7.89

$

7.83

$

7.66

$

7.47

Exposure to Puerto Rico Government

As of December 31, 2016, the Corporation had $323.3 million of direct
exposure to the Puerto Rico Government, its municipalities and public
corporations, compared to $325.9 million as of September 30, 2016.
Approximately $191.9 million of the exposure consisted of loans and
obligations of municipalities in Puerto Rico that are supported by
assigned property tax revenues and for which, in most cases, the good
faith, credit and unlimited taxing power of the applicable municipality
have been pledged to their repayment. Approximately $6.9 million
consisted of loans to units of the central government, and approximately
$81.9 million consisted of loans to public corporations, including the
direct exposure to the Puerto Rico Electric Power Authority (“PREPA”)
with a book value of $65.5 million as of December 31, 2016. The
Corporation’s total direct exposure also includes obligations of the
Puerto Rico Government with an amortized cost of $42.7 million as part
of its available-for-sale investment securities portfolio, net of $22.2
million in cumulative other-than-temporary credit impairment charges,
and recorded on its books at a fair value of $26.8 million as of
December 31, 2016.

In addition, the Corporation had financings to the hotel industry in
Puerto Rico guaranteed by the TDF with a book value of $111.8 million as
of December 31, 2016, down $1.0 million, compared to $112.8 million as
of September 30, 2016. As previously reported, the Corporation’s
exposure to commercial loans guaranteed by the TDF was placed in
non-accrual status in the first quarter of 2016 and interest payments
collected are now applied against principal. Approximately $2.0 million
of interest payments received on loans guaranteed by the TDF since late
March 2016 have been applied against principal. The largest of these
three facilities is current on contractual payments. The Corporation has
been receiving partial payments from the other two facilities since
their operations are insufficient to cover the entire contractual
payments and the Corporation is not receiving collections from the TDF
guarantee. As of December 31, 2016, the total reserve coverage ratio
related to commercial loans extended to or guaranteed by the Puerto Rico
Government (excluding municipalities) was 17%.

The exposure to municipalities in Puerto Rico includes $156.2 million of
financing arrangements with Puerto Rico municipalities that were issued
in bond form, but underwritten as loans with features that are typically
found in commercial loans. These bonds are accounted for as
held-to-maturity investment securities.

As of December 31, 2016, the Corporation had $408.8 million of public
sector deposits in Puerto Rico, compared to $463.5 million as of
September 30, 2016. Approximately 28% is from municipalities and
municipal agencies in Puerto Rico and 72% is from public corporations
and the central government and agencies in Puerto Rico.

Conference Call / Webcast Information

First BanCorp’s senior management will host an earnings conference call
and live webcast on Thursday, January 26, 2017, at 10:00 a.m. (Eastern
Time). The call may be accessed via a live Internet webcast through the
investor relations section of the Corporation’s web site: www.1firstbank.com
or through a dial-in telephone number at (877) 506-6537 or (412)
380–2001 for international callers. The Corporation recommends that
listeners go to the web site at least 15 minutes prior to the call to
download and install any necessary software. Following the webcast
presentation, a question and answer session will be made available to
research analysts and institutional investors. A replay of the webcast
will be archived in the investor relations section of First BanCorp’s
web site, www.1firstbank.com,
until January 26, 2018. A telephone replay will be available one hour
after the end of the conference call through February 26, 2017 at (877)
344-7529 or (412) 317-0088 for international callers. The replay access
code is 10099840.

Safe Harbor

This press release may contain “forward-looking statements” concerning
the Corporation’s future economic, operational and financial
performance. The words or phrases “expect,” “anticipate,” “intend,”
“look forward,” “should,” “would,” “believes” and similar expressions
are meant to identify “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and are subject to
the safe harbor created by such sections. The Corporation cautions
readers not to place undue reliance on any such “forward-looking
statements,” which speak only as of the date made, and advises readers
that various factors, including, but not limited to, the following could
cause actual results to differ materially from those expressed in, or
implied by such forward-looking statements: the ability of the Puerto
Rico government or any of its public corporations or other
instrumentalities to repay its respective debt obligations, including as
a result of payment defaults on the Puerto Rico government general
obligations, bonds of the Government Development Bank for Puerto Rico
and certain bonds of government public corporations, and recent and any
future downgrades of the long-term and short-term debt ratings of the
Puerto Rico government, which could exacerbate Puerto Rico’s adverse
economic conditions and, in turn, further adversely impact the
Corporation; uncertainty as to the ultimate outcomes of actions
resulting from the enactment by the U.S. government of the Puerto Rico
Oversight, Management, and Economic Stability Act (PROMESA) to address
Puerto Rico’s financial problems; uncertainty about whether the
Corporation will be able to continue to fully comply with the written
agreement dated June 3, 2010 that the Corporation entered into with the
Federal Reserve Bank of New York (the “New York Fed”), that, among other
things, requires the Corporation to serve as a source of strength to
FirstBank and that, except with the consent generally of the New York
Fed and the Board of Governors of the Federal Reserve System (the
“Federal Reserve Board”), prohibits the Corporation from paying
dividends to stockholders or receiving dividends from FirstBank, making
payments on trust preferred securities or subordinated debt and
incurring, increasing or guaranteeing debt or repurchasing any capital
securities and uncertainty whether such consent will be provided for
future interest payments on the subordinated debt despite the consents
that enabled the Corporation to pay all the accrued but deferred
interest payments plus the interest for the second, third and fourth
quarters of 2016 on the Corporation’s subordinated debentures associated
with its trust preferred securities, and for future monthly dividend on
its non-cumulative perpetual preferred stock, despite the consent that
enabled the Corporation to pay monthly dividends on its non-cumulative
perpetual preferred stock for December and January; a decrease in demand
for the Corporation’s products and services and lower revenues and
earnings because of the continued recession in Puerto Rico; uncertainty
as to the availability of certain funding sources, such as brokered CDs;
the Corporation’s reliance on brokered CDs to fund operations and
provide liquidity; the risk of not being able to fulfill the
Corporation’s cash obligations or resume paying dividends to the
Corporation’s common stockholders in the future due to the Corporation’s
need to receive approval from the New York Fed, the Federal Reserve
Board and the Office of the Commissioner of Financial Institutions of
Puerto Rico to declare or pay any dividends and to take dividends or any
other form of payment representing a reduction in capital from FirstBank
or FirstBank’s failure to generate sufficient cash flow to make a
dividend payment to the Corporation; the weakness of the real estate
markets and of the consumer and commercial sectors and their impact on
the credit quality of the Corporation’s loans and other assets, which
have contributed and may continue to contribute to, among other things,
high levels of non-performing assets, charge-offs and provisions for
loan and lease losses and may subject the Corporation to further risk
from loan defaults and foreclosures; the ability of FirstBank to realize
the benefits of its deferred tax assets subject to the remaining
valuation allowance; adverse changes in general economic conditions in
Puerto Rico, the U.S., and the U.S. Virgin Islands and British Virgin
Islands, including the interest rate environment, market liquidity,
housing absorption rates, real estate prices, and disruptions in the
U.S. capital markets, which reduced interest margins and affected
funding sources, and has affected demand for all of the Corporation’s
products and services and reduced the Corporation’s revenues and
earnings, and the value of the Corporation’s assets, and may continue to
have these effects; an adverse change in the Corporation’s ability to
attract new clients and retain existing ones; the risk that additional
portions of the unrealized losses in the Corporation’s investment
portfolio are determined to be other-than-temporary, including
additional impairments on the Puerto Rico government’s obligations;
uncertainty about regulatory and legislative changes for financial
services companies in Puerto Rico, the U.S., and the U.S. and British
Virgin Islands, which could affect the Corporation’s financial condition
or performance and could cause the Corporation’s actual results for
future periods to differ materially from prior results and anticipated
or projected results; changes in the fiscal and monetary policies and
regulations of the U.S. federal government and the Puerto Rico and other
governments, including those determined by the Federal Reserve Board,
the New York Fed, the FDIC, government-sponsored housing agencies, and
regulators in Puerto Rico and the U.S. and British Virgin Islands; the
risk of possible failure or circumvention of controls and procedures and
the risk that the Corporation’s risk management policies may not be
adequate; the risk that the FDIC may increase the deposit insurance
premium and/or require special assessments to replenish its insurance
fund, causing an additional increase in the Corporation’s non-interest
expenses; the impact on the Corporation’s results of operations and
financial condition of acquisitions and dispositions; a need to
recognize additional impairments on the Corporation’s financial
instruments, goodwill or other intangible assets relating to
acquisitions; the risk that downgrades in the credit ratings of the
Corporation’s long-term senior debt will adversely affect the
Corporation’s ability to access necessary external funds; the impact on
the Corporation’s businesses, business practices and results of
operations of a potential higher interest rate environment; and general
competitive factors and industry consolidation. The Corporation does not
undertake, and specifically disclaims any obligation, to update any
“forward-looking statements” to reflect occurrences or unanticipated
events or circumstances after the date of such statements, except as
required by the federal securities laws.

Basis of Presentation

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. Non-GAAP
financial measures are used when management believes they will be
helpful to an investor’s understanding of the Corporation’s results of
operations or financial position. Where non-GAAP financial measures are
used, the comparable GAAP financial measure, as well as the
reconciliation of the non-GAAP financial measure to the comparable GAAP
financial measure, can be found in the text or in the attached tables to
this earnings release. Any analysis of these non-GAAP financial measures
should be used only in conjunction with results presented in accordance
with GAAP.

Tangible Common Equity Ratio and Tangible Book Value per Common Share

The tangible common equity ratio and tangible book value per common
share are non-GAAP financial measures generally used by the financial
community to evaluate capital adequacy. Tangible common equity is total
equity less preferred equity, goodwill, core deposit intangibles, and
other intangibles, such as the purchased credit card relationship
intangible and the insurance customer relationship intangible. Tangible
assets are total assets less goodwill, core deposit intangibles, and
other intangibles, such as the purchased credit card relationship
intangible and the insurance customer relationship intangible.
Management and many stock analysts use the tangible common equity ratio
and tangible book value per common share in conjunction with more
traditional bank capital ratios to compare the capital adequacy of
banking organizations with significant amounts of goodwill or other
intangible assets, typically stemming from the use of the purchase
method of accounting for mergers and acquisitions. Accordingly, the
Corporation believes that disclosures of these financial measures may be
useful also to investors. Neither tangible common equity nor tangible
assets, or the related measures should be considered in isolation or as
a substitute for stockholders’ equity, total assets, or any other
measure calculated in accordance with GAAP. Moreover, the manner in
which the Corporation calculates its tangible common equity, tangible
assets, and any other related measures may differ from that of other
companies reporting measures with similar names.

Adjusted Pre-Tax, Pre-Provision Income

Adjusted pre-tax, pre-provision income is a non-GAAP performance metric
that management uses and believes that investors may find useful in
analyzing underlying performance trends, particularly in times of
economic stress. Adjusted pre-tax, pre-provision income, as defined by
management, represents net income (loss) excluding income tax expense
(benefit), the provision for loan and lease losses, as well as certain
items that management believes are not reflective of core operating
performance, are not expected to reoccur with any regularity or may
reoccur at uncertain times and in uncertain amounts.

Net Interest Income, Excluding Valuations, and on a Tax-Equivalent
Basis

Net interest income, interest rate spread, and net interest margin are
reported excluding the changes in the fair value of derivative
instruments and on a tax-equivalent basis in order to provide to
investors additional information about the Corporation’s net interest
income that management uses and believes should facilitate comparability
and analysis. The changes in the fair value of derivative instruments
have no effect on interest due or interest earned on interest-bearing
liabilities or interest-earning assets, respectively. The tax-equivalent
adjustment to net interest income recognizes the income tax savings when
comparing taxable and tax-exempt assets and assumes a marginal income
tax rate. Income from tax-exempt earning assets is increased by an
amount equivalent to the taxes that would have been paid if this income
had been taxable at statutory rates. Management believes that it is a
standard practice in the banking industry to present net interest
income, interest rate spread, and net interest margin on a fully
tax-equivalent basis. This adjustment puts all earning assets, most
notably tax-exempt securities and certain loans, on a common basis that
facilitates comparison of results to the results of peers.

Financial measures adjusted to exclude the effect of the sale of the
$16.3 million pool of non-performing assets, the bulk sale of assets,
the gain from recovery of investments previously written off, brokerage
and insurance commissions from the sale of large fixed annuities
contracts, adjustment to the credit card rewards liability due to
unusually large customer forfeitures, costs associated with the
secondary offering, gains on sales of investment securities, severance
payments on job discontinuance and expenses related to the voluntary
early retirement program above what the Corporation believes are the
normal or recurring level of those expenses, OTTI charges on debt
securities, the gain on the repurchase and cancellation of trust
preferred securities, the gain on sale of merchant contracts, the
bargain purchase gain on assets acquired and deposits assumed from Doral
Bank and related acquisition and conversion costs.

To supplement the Corporation’s financial statements presented in
accordance with GAAP, the Corporation uses, and believes that investors
would benefit from disclosure of non-GAAP financial measures that
reflect adjustments to the provision for loan and lease losses, net
charge-offs, non-interest income, non-interest expenses and net income
to exclude items that management believes are not reflective of core
operating performance, are not expected to reoccur with any regularity
or may reoccur at uncertain times and in uncertain amounts. During the
fourth and third quarters of 2016, the fourth quarter of 2015 and the
years ended December 31, 2016 and 2015, the following items were
excluded for one of those reasons:

Adjusted provision for loan and lease losses for the fourth quarter
and year ended December 31, 2016 excludes the effect of the $1.8
million charge related to the sale of the $16.3 million pool of
non-performing assets in the fourth quarter of 2016 and for the year
ended December 31, 2015 excludes the $46.9 million charge to the
provision on the bulk sale of assets executed in the second quarter of
2015.

Adjusted net charge-offs for the fourth quarter and year ended
December 31, 2016 excludes the effect of net charge-offs of $4.6
million related to the sale of the $16.3 million pool of
non-performing assets in the fourth quarter of 2016 and for the year
ended December 31, 2015 excludes net charge-offs of $61.4 million
related to the bulk sale of assets executed in the second quarter of
2015.

Adjusted non-interest income excludes for the fourth and third
quarters of 2016, the fourth quarter of 2015 and the years ended
December 31, 2016 and 2015 the following:

Gain of $1.5 million from the recovery of a residual CMO
previously written off once the trust was liquidated in the fourth
quarter of 2016.

Brokerage and insurance commissions of $1.8 million from the sale
of large fixed annuities contracts recorded in the fourth quarter
of 2016.

Gain of $6.1 million on sales of U.S. agency MBS recorded in the
third quarter of 2016.

OTTI charges on debt securities of $3.0 million, $6.7 million, and
$16.5 million for the fourth quarter of 2015, and years ended
December 31, 2016 and 2015, respectively.

Gain of $4.2 million on the repurchase and cancellation of trust
preferred securities recorded in the first quarter of 2016.

Gain of $7.0 million on the sale of merchant contracts recorded in
the fourth quarter of 2015.

Loss of $0.6 million on loans held for sale included in the bulk
sale of assets executed in the second quarter of 2015.

Bargain purchase gain of $13.4 million on assets acquired and
liabilities assumed from Doral Bank in the first quarter of 2015.

Adjusted non-interest expenses excludes for the fourth and third
quarters of 2016, the fourth quarter of 2015 and the years ended
December 31, 2016 and 2015 the following:

A $2.7 million adjustment recorded in the fourth quarter of 2016
to reduce the credit card rewards liability due to the expiration
of reward points earned by customers up to September 2013 (the
conversion date of the credit card portfolio acquired from FIA in
May 2012). Most of these points had been accrued at acquisition
date and ultimately experienced a redemption pattern materially
different from those points accrued after conversion.

Incentive costs of $0.1 million related to the sale of large fixed
annuities contracts recorded in the fourth quarter of 2016.

Costs of $0.6 million associated with the secondary offering of
the Corporation’s common stock by certain of the existing
stockholders recorded in the fourth quarter of 2016.

Severance payments of $0.3 million related to permanent job
discontinuance recorded in the third quarter of 2016.

Costs of $2.2 million related to a voluntary early retirement
program recorded in the fourth quarter of 2015.

Transaction expenses and certain losses totaling $1.2 million
related to the bulk sale of assets executed in the second quarter
of 2015.

Acquisition and conversion costs of $4.6 million related to assets
acquired and liabilities assumed from Doral Bank recorded in the
first half of 2015.

Adjusted net income excludes the effect of all the items mentioned in
the above bullets for the fourth and third quarters of 2016, the
fourth quarter of 2015, and the years ended December 31, 2016 and 2015
and their related tax impacts as follows:

Tax benefit of $0.7 million related to the sale of the $16.3
million pool of non-performing assets in the fourth quarter of
2016 (calculated based on the statutory tax rate of 39%).

Tax expense of $0.3 million related to the gain from recovery of a
residual CMO previously written off, which was recorded in the
fourth quarter of 2016 (calculated based on the applicable capital
gain tax rate of 20%).

Tax expense of $0.7 million related to brokerage and insurance
commissions from the sale of large fixed annuities contracts, net
of incentive costs, recorded in the fourth quarter of 2016
(calculated based on the statutory tax rate of 39%).

Tax expense of $1.1 million related to the adjustment to reduce
the credit card rewards liability due to unusually large customer
forfeitures, which was recorded in the fourth quarter of 2016
(calculated based on the statutory tax rate of 39%).

Tax expense of $0.2 million related to the taxable portion of the
gain on sale of U.S. agency MBS, which was recorded in the third
quarter of 2016 (calculated based on the applicable capital gain
tax rate of 20%).

Tax benefit of $0.1 million related to the severance expense,
which was recorded in the third quarter of 2016 (calculated based
on the statutory tax rate of 39%).

Tax expense of $2.7 million related to the gain on sale of
merchant contracts, which was recorded in the fourth quarter of
2015 (calculated based on the statutory tax rate of 39%).

Tax benefit of $0.9 million related to the voluntary early
retirement program expenses, which was recorded in the fourth
quarter of 2015 (calculated based on the statutory tax rate of
39%).

Tax benefit of $19.0 million related to charges on the bulk sale
of assets, including transaction costs, executed in the second
quarter of 2015 (calculated based on the statutory tax rate of
39%).

Tax expense of $5.2 million related to the bargain purchase gain
on assets acquired and liabilities assumed from Doral Bank in the
first quarter of 2015 (calculated based on the statutory tax rate
of 39%).

Tax benefit of $1.8 million related to acquisition and conversion
costs of assets acquired and liabilities assumed from Doral Bank
in the first half of 2015 (calculated based on the statutory tax
rate of 39%).

No tax benefit was recorded for the OTTI charges recorded in 2016
and 2015.

The gain realized on the repurchase and cancellation of trust
preferred securities and costs incurred associated with the
secondary offering, recorded at the holding company level, had no
effect on the income tax expense in 2016.

Management believes that the adjusted provision for loan and lease
losses, adjusted net charge-offs, adjusted non-interest income, adjusted
non-interest expenses, and adjusted net income enhance the ability of
analysts and investors to analyze trends in the Corporation’s business
and better understand the performance of the Corporation. In addition,
the Corporation may utilize these non-GAAP financial measures as guides
in its budgeting and long-term planning process.

The following table reconciles these non-GAAP financial measures to the
corresponding measures presented in accordance with GAAP.

First BanCorp. is the parent corporation of FirstBank Puerto Rico, a
state-chartered commercial bank with operations in Puerto Rico, the U.S.
and the British Virgin Islands and Florida, and of FirstBank Insurance
Agency. Among the subsidiaries of FirstBank Puerto Rico are First
Federal Finance Corp. and First Express, both small loan companies, and
FirstBank Puerto Rico Securities, a broker-dealer subsidiary. First
BanCorp’s shares of common stock trade on the New York Stock Exchange
under the symbol FBP. Additional information about First BanCorp. may be
found at www.1firstbank.com.

EXHIBIT A

Table 1 – Selected Financial Data

(In thousands, except per share amounts and financial ratios)

Quarter Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2016

2016

2015

2016

2015

Condensed Income Statements:

Total interest income

$

143,954

$

143,573

$

151,640

$

585,292

$

605,569

Total interest expense

22,890

25,395

26,427

101,174

103,303

Net interest income

121,064

118,178

125,213

484,118

502,266

Provision for loan and lease losses

23,191

21,503

33,633

86,733

172,045

Non-interest income

23,561

26,146

23,168

87,954

81,325

Non-interest expenses

84,236

88,303

96,026

355,080

383,830

Income before income taxes

37,198

34,518

18,722

130,259

27,716

Income tax expense

(13,340

)

(10,444

)

(3,755

)

(37,030

)

(6,419

)

Net income

23,858

24,074

14,967

93,229

21,297

Net income attributable to common stockholders

23,635

24,074

14,967

93,006

21,297

Per Common Share Results:

Net earnings per share - basic

$

0.11

$

0.11

$

0.07

$

0.44

$

0.10

Net earnings per share - diluted

$

0.11

$

0.11

$

0.07

$

0.43

$

0.10

Cash dividends declared

$

-

$

-

$

-

$

-

$

-

Average shares outstanding

213,225

212,927

212,058

212,818

211,457

Average shares outstanding diluted

217,396

216,578

214,092

215,794

212,971

Book value per common share

$

8.05

$

8.11

$

7.71

$

8.05

$

7.71

Tangible book value per common share (1)

$

7.83

$

7.89

$

7.47

$

7.83

$

7.47

Selected Financial Ratios (In Percent):

Profitability:

Return on Average Assets

0.80

0.78

0.46

0.75

0.17

Interest Rate Spread (2)

4.12

3.89

4.01

3.99

4.08

Net Interest Margin (2)

4.39

4.15

4.23

4.25

4.30

Return on Average Total Equity

5.29

5.35

3.49

5.28

1.26

Return on Average Common Equity

5.40

5.46

3.57

5.39

1.29

Average Total Equity to Average Total Assets

15.10

14.58

13.20

14.25

13.23

Total capital

21.37

21.27

20.01

21.37

20.01

Common equity Tier 1 capital

17.77

17.64

16.92

17.77

16.92

Tier 1 capital

17.77

17.64

16.92

17.77

16.92

Leverage

13.70

13.04

12.22

13.70

12.22

Tangible common equity ratio (1)

14.34

14.27

12.84

14.34

12.84

Dividend payout ratio

-

-

-

-

-

Efficiency ratio (3)

58.24

61.18

64.72

62.07

65.77

Asset Quality:

Allowance for loan and lease losses to loans held for investment

2.31

2.42

2.64

2.31

2.64

Net charge-offs (annualized) to average loans

1.43

(4)

1.90

0.96

1.37

(4)

1.68

(6)

Provision for loan and lease losses to net charge-offs

73.26

(5)

51.34

153.65

71.19

(5)

111.91

(7)

Non-performing assets to total assets

6.16

6.16

4.85

6.16

4.85

Non-performing loans held for investment to total loans held for
investment

On a tax-equivalent basis and excluding changes in the fair value
of derivative instruments (Non-GAAP financial measure). See page 6
for GAAP to Non-GAAP reconciliations and refer to discussions in
Tables 2 and 3 below.

3

-

Non-interest expenses to the sum of net interest income and
non-interest income. The denominator includes non-recurring income
and changes in the fair value of derivative instruments.

4

-

The ratio of net charge-offs to average loans, excluding
charge-offs associated with the sale of the $16.3 million pool of
non-performing assets completed in the fourth quarter of 2016, was
1.22% and 1.32% for the quarter and year ended December 31, 2016,
respectively.

5

-

The ratio of the provision for loan and lease losses to net
charge-offs, excluding the impact of the sale of the $16.3 million
pool of non-performing assets completed in the fourth quarter of
2016, was 79.15% and 72.46% for the quarter and year ended
December 31, 2016, respectively.

6

-

The ratio of net charge-offs to average loans, excluding
charge-offs associated with the bulk sale of assets completed in
the second quarter of 2015, was 1.01% for the year ended December
31, 2015.

7

-

The ratio of the provision for loan and lease losses to net
charge-offs, excluding the impact of the bulk sale of assets
completed in the second quarter of 2015, was 135.54% for the year
ended December 31, 2015.

Table 2 – Quarterly Statement of Average Interest-Earning
Assets and Average Interest-Bearing Liabilities (On a
Tax-Equivalent Basis and Excluding Valuations)

(Dollars in thousands)

Average volume

Interest income (1) / expense

Average rate (1)

December 31,

September 30,

December 31,

December 31,

September 30,

December 31,

December 31,

September 30,

December 31,

Quarter ended

2016

2016

2015

2016

2016

2015

2016

2016

2015

Interest-earning assets:

Money market & other short-term investments

$

291,703

$

525,172

$

979,628

$

359

$

662

$

691

0.49

%

0.50

%

0.28

%

Government obligations (2)

753,888

785,670

677,318

4,176

5,189

5,535

2.20

%

2.63

%

3.24

%

Mortgage-backed securities

1,265,628

1,395,189

1,421,406

7,880

8,017

12,116

2.48

%

2.29

%

3.38

%

FHLB stock

32,428

30,939

29,718

388

368

263

4.76

%

4.73

%

3.51

%

Other investments

2,596

2,047

985

3

2

-

0.46

%

0.39

%

0.00

%

Total investments (3)

2,346,243

2,739,017

3,109,055

12,806

14,238

18,605

2.17

%

2.07

%

2.37

%

Residential mortgage loans

3,282,422

3,298,546

3,328,651

44,514

44,888

45,619

5.40

%

5.41

%

5.44

%

Construction loans

134,795

132,658

166,818

1,240

1,069

1,614

3.66

%

3.21

%

3.84

%

C&I and commercial mortgage loans

3,726,374

3,667,955

3,756,070

41,576

38,957

40,776

4.44

%

4.23

%

4.31

%

Finance leases

229,843

228,578

227,911

4,304

4,301

4,559

7.45

%

7.49

%

7.94

%

Consumer loans

1,486,660

1,507,101

1,613,788

42,005

42,598

45,387

11.24

%

11.24

%

11.16

%

Total loans (4) (5)

8,860,094

8,834,838

9,093,238

133,639

131,813

137,955

6.00

%

5.94

%

6.02

%

Total interest-earning assets

$

11,206,337

$

11,573,855

$

12,202,293

$

146,445

$

146,051

$

156,560

5.20

%

5.02

%

5.09

%

Interest-bearing liabilities:

Brokered CDs

$

1,502,386

$

1,670,324

$

2,264,655

$

4,887

$

5,177

$

6,312

1.29

%

1.23

%

1.11

%

Other interest-bearing deposits

5,887,005

5,959,320

6,015,196

11,192

11,565

11,413

0.76

%

0.77

%

0.75

%

Other borrowed funds

592,274

835,752

963,449

5,263

7,179

7,364

3.54

%

3.42

%

3.03

%

FHLB advances

483,750

449,565

420,326

1,548

1,474

1,338

1.27

%

1.30

%

1.26

%

Total interest-bearing liabilities

$

8,465,415

$

8,914,961

$

9,663,626

$

22,890

$

25,395

$

26,427

1.08

%

1.13

%

1.08

%

Net interest income

$

123,555

$

120,656

$

130,133

Interest rate spread

4.12

%

3.89

%

4.01

%

Net interest margin

4.39

%

4.15

%

4.23

%

1

-

On a tax-equivalent basis. The tax-equivalent yield was estimated
by dividing the interest rate spread on exempt assets by 1 less
the Puerto Rico statutory tax rate of 39% and adding to it the
cost of interest-bearing liabilities. When adjusted to a
tax-equivalent basis, yields on taxable and exempt assets are
comparable. Changes in the fair value of derivative instruments
are excluded from interest income because the changes in valuation
do not affect interest paid or received. See page 6 for GAAP to
Non-GAAP reconciliations.

2

-

Government obligations include debt issued by government-sponsored
agencies.

3

-

Unrealized gains and losses on available-for-sale securities are
excluded from the average volumes.

4

-

Average loan balances include the average of non-performing loans.

5

-

Interest income on loans includes $2.3 million, $2.4 million and
$2.9 million for the quarters ended December 31, 2016, September
30, 2016, and December 31, 2015, respectively, of income from
prepayment penalties and late fees related to the Corporation's
loan portfolio.

Table 3 – Year-to-Date Statement of Average Interest-Earning
Assets and Average Interest-Bearing Liabilities (On a
Tax-Equivalent Basis and Excluding Valuations)

(Dollars in thousands)

Average volume

Interest income (1) / expense

Average rate (1)

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

Year Ended

2016

2015

2016

2015

2016

2015

Interest-earning assets:

Money market & other short-term investments

$

667,838

$

775,848

$

3,365

$

2,148

0.50

%

0.28

%

Government obligations (2)

746,890

636,734

20,849

20,560

2.79

%

3.23

%

Mortgage-backed securities

1,357,518

1,489,423

38,072

44,909

2.80

%

3.02

%

FHLB stock

31,449

26,522

1,454

1,075

4.62

%

4.05

%

Other investments

1,963

777

8

-

0.41

%

0.00

%

Total investments (3)

2,805,658

2,929,304

63,748

68,692

2.27

%

2.34

%

Residential mortgage loans

3,302,519

3,272,464

180,051

181,400

5.45

%

5.54

%

Construction loans

143,095

169,666

5,225

6,357

3.65

%

3.75

%

C&I and commercial mortgage loans

3,694,988

3,821,843

160,329

162,496

4.34

%

4.25

%

Finance leases

229,632

228,709

17,349

18,259

7.56

%

7.98

%

Consumer loans

1,526,475

1,670,245

171,858

186,120

11.26

%

11.14

%

Total loans (4) (5)

8,896,709

9,162,927

534,812

554,632

6.01

%

6.05

%

Total interest-earning assets

$

11,702,367

$

12,092,231

$

598,560

$

623,324

5.11

%

5.15

%

Interest-bearing liabilities:

Brokered CDs

$

1,805,443

$

2,428,185

$

21,928

$

24,904

1.21

%

1.03

%

Other interest-bearing deposits

5,944,742

5,924,715

45,374

44,346

0.76

%

0.75

%

Other borrowed funds

833,283

997,615

27,908

29,882

3.35

%

3.00

%

FHLB advances

460,861

349,027

5,964

4,171

1.29

%

1.20

%

Total interest-bearing liabilities

$

9,044,329

$

9,699,542

$

101,174

$

103,303

1.12

%

1.07

%

Net interest income

$

497,386

$

520,021

Interest rate spread

3.99

%

4.08

%

Net interest margin

4.25

%

4.30

%

1

-

On a tax-equivalent basis. The tax-equivalent yield was estimated
by dividing the interest rate spread on exempt assets by 1 less
the Puerto Rico statutory tax rate of 39% and adding to it the
cost of interest-bearing liabilities. When adjusted to a
tax-equivalent basis, yields on taxable and exempt assets are
comparable. Changes in the fair value of derivative instruments
are excluded from interest income because the changes in valuation
do not affect interest paid or received. See page 6 for GAAP to
Non-GAAP reconciliation.

2

-

Government obligations include debt issued by government-sponsored
agencies.

3

-

Unrealized gains and losses on available-for-sale securities are
excluded from the average volumes.

4

-

Average loan balances include the average of non-performing loans.

5

-

Interest income on loans includes $9.9 million and $10.8 million
for the years ended December 31, 2016 and 2015, respectively, of
income from prepayment penalties and late fees related to the
Corporation's loan portfolio.

Table 4 – Non-Interest Income

Quarter Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

(In thousands)

2016

2016

2015

2016

2015

Service charges on deposit accounts

$

5,759

$

5,788

$

5,474

$

22,965

$

20,330

Mortgage banking activities

5,304

5,485

4,566

20,435

17,217

Insurance income

2,298

1,363

1,249

8,473

7,058

Broker-dealer income

789

-

-

789

-

Other operating income

7,864

7,414

7,912

30,111

32,794

Non-interest income before net gain (loss) on investments,

bargain purchase gain, and gain on early extinguishment of debt

22,014

20,050

19,201

82,773

77,399

Net gain (loss) on sale of investments

-

6,096

-

6,104

-

Gain from recovery of investments previously written off

1,547

-

-

1,547

-

OTTI on debt securities

-

-

(3,033

)

(6,687

)

(16,517

)

Net gain (loss) on investments

1,547

6,096

(3,033

)

964

(16,517

)

Bargain purchase gain

-

-

-

-

13,443

Gain on sale of merchant contracts

-

-

7,000

-

7,000

Gain on early extinguishment of debt

-

-

-

4,217

-

$

23,561

$

26,146

$

23,168

$

87,954

$

81,325

Table 5 - Non-Interest Expenses

Quarter Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

(In thousands)

2016

2016

2015

2016

2015

Employees' compensation and benefits

$

37,652

$

38,005

$

39,176

$

151,493

$

149,955

Occupancy and equipment

14,045

13,888

14,639

55,159

59,177

Deposit insurance premium

3,920

4,333

7,484

20,055

23,959

Other insurance and supervisory fees

987

1,271

1,291

4,865

5,062

Taxes, other than income taxes

3,664

3,927

3,472

15,139

12,669

Professional fees:

Collections, appraisals and other credit related fees

2,344

2,267

3,340

9,890

12,818

Outsourcing technology services

5,435

5,124

4,505

20,264

18,547

Other professional fees

3,583

3,281

2,855

13,983

19,641

Credit and debit card processing expenses

3,533

3,546

3,992

13,635

16,177

Business promotion

199

3,169

4,335

11,419

14,797

Communications

1,515

1,711

1,884

6,759

7,726

Net loss on OREO operations

2,399

2,603

3,941

11,533

15,538

Loss on sale of certain OREOs included in a bulk sale

-

-

-

-

250

Bulk sale of assets related expenses

-

-

-

-

918

Acquisitions of loans/assumption of deposits from

Doral Bank non-recurring expenses

-

-

-

-

4,646

Other

4,960

5,178

5,112

20,886

21,950

Total

$

84,236

$

88,303

$

96,026

$

355,080

$

383,830

Table 6 - Selected Balance Sheet Data

(In thousands)

As of

December 31,

September 30,

December 31,

2016

2016

2015

Balance Sheet Data:

Loans, including loans held for sale

$

8,936,879

$

8,920,433

$

9,148,251

Allowance for loan and lease losses

205,603

214,070

240,710

Money market and investment securities

2,091,196

2,038,868

2,299,520

Intangible assets

46,754

47,981

50,583

Deferred tax asset, net

286,350

290,877

311,263

Total assets

11,922,455

12,075,253

12,573,019

Deposits

8,831,205

8,981,313

9,338,124

Borrowings

1,186,187

1,171,187

1,381,492

Total preferred equity

36,104

36,104

36,104

Total common equity

1,784,529

1,759,422

1,685,779

Accumulated other comprehensive (loss) income, net of tax

(34,390

)

4,360

(27,749

)

Total equity

1,786,243

1,799,886

1,694,134

Table 7 – Loan Portfolio

Composition of the loan portfolio including loans held for sale at
period-end.

(In thousands)

As of

December 31,

September 30,

December 31,

2016

2016

2015

Residential mortgage loans

$

3,296,031

$

3,299,942

$

3,344,719

Commercial loans:

Construction loans

124,951

124,298

156,195

Commercial mortgage loans

1,568,808

1,545,014

1,537,806

Commercial and Industrial loans

2,180,455

2,167,011

2,246,513

Commercial loans

3,874,214

3,836,323

3,940,514

Finance leases

233,335

229,577

229,165

Consumer loans

1,483,293

1,497,812

1,597,984

Loans held for investment

8,886,873

8,863,654

9,112,382

Loans held for sale

50,006

56,779

35,869

Total loans

$

8,936,879

$

8,920,433

$

9,148,251

Table 8 – Loan Portfolio by Geography

(In thousands)

As of December 31, 2016

Puerto Rico

Virgin Islands

United States

Consolidated

Residential mortgage loans

$

2,480,076

$

314,915

$

501,040

$

3,296,031

Commercial loans:

Construction loans

42,753

44,687

37,511

124,951

Commercial mortgage loans

1,177,550

79,365

311,893

1,568,808

Commercial and Industrial loans

1,571,097

139,795

469,563

2,180,455

Commercial loans

2,791,400

263,847

818,967

3,874,214

Finance leases

233,335

-

-

233,335

Consumer loans

1,383,485

48,958

50,850

1,483,293

Loans held for investment

6,888,296

627,720

1,370,857

8,886,873

Loans held for sale

38,423

-

11,583

50,006

Total loans

$

6,926,719

$

627,720

$

1,382,440

$

8,936,879

(In thousands)

As of September 30, 2016

Puerto Rico

Virgin Islands

United States

Consolidated

Residential mortgage loans

$

2,505,623

$

319,855

$

474,464

$

3,299,942

Commercial loans:

Construction loans

43,917

45,736

34,645

124,298

Commercial mortgage loans

1,181,682

76,462

286,870

1,545,014

Commercial and Industrial loans

1,596,242

119,931

450,838

2,167,011

Commercial loans

2,821,841

242,129

772,353

3,836,323

Finance leases

229,577

-

-

229,577

Consumer loans

1,401,750

48,918

47,144

1,497,812

Loans held for investment

6,958,791

610,902

1,293,961

8,863,654

Loans held for sale

43,262

461

13,056

56,779

Total loans

$

7,002,053

$

611,363

$

1,307,017

$

8,920,433

(In thousands)

As of December 31, 2015

Puerto Rico

Virgin Islands

United States

Consolidated

Residential mortgage loans

$

2,575,888

$

327,976

$

440,855

$

3,344,719

Commercial loans:

Construction loans

63,654

69,874

22,667

156,195

Commercial mortgage loans

1,208,347

69,773

259,686

1,537,806

Commercial and Industrial loans

1,714,660

173,916

357,937

2,246,513

Commercial loans

2,986,661

313,563

640,290

3,940,514

Finance leases

229,165

-

-

229,165

Consumer loans

1,506,773

48,430

42,781

1,597,984

Loans held for investment

7,298,487

689,969

1,123,926

9,112,382

Loans held for sale

33,787

507

1,575

35,869

Total loans

$

7,332,274

$

690,476

$

1,125,501

$

9,148,251

Table 9 – Non-Performing Assets

(Dollars in thousands)

December 31,

September 30,

December 31,

2016

2016

2015

Non-performing loans held for investment:

Residential mortgage

$ 160,867

$ 162,201

$ 169,001

Commercial mortgage

178,696

191,449

51,333

Commercial and Industrial

146,599

137,016

137,051

Construction

49,852

50,767

54,636

Consumer and Finance leases

24,080

25,279

30,752

Total non-performing loans held for investment

560,094

566,712

442,773

OREO

137,681

139,446

146,801

Other repossessed property

7,300

9,416

12,223

Other assets (1)

21,362

20,393

-

Total non-performing assets, excluding loans held for sale

$ 726,437

$ 735,967

$ 601,797

Non-performing loans held for sale

8,079

8,079

8,135

Total non-performing assets, including loans held for sale (2)

$ 734,516

$ 744,046

$ 609,932

Past-due loans 90 days and still accruing (3)

$ 135,808

$ 138,442

$ 163,197

Allowance for loan and lease losses

$ 205,603

$ 214,070

$ 240,710

Allowance to total non-performing loans held for investment

36.71%

37.77%

54.36%

Allowance to total non-performing loans held for investment,
excluding residential real estate loans

51.50%

52.92%

87.92%

(1)

Bonds of the Government Development Bank for Puerto Rico ("GDB")
and the Puerto Rico Public Buildings Authority held as part of the
available-for-sale investment securities portfolio with an
amortized cost of $35.6 million, including accrued interest of
$0.9 million, recorded on the Corporation's books at their
aggregate fair value of $20.5 million (September 30, 2016 - $19.5
million).

(2)

Purchased credit impaired loans of $165.8 million accounted for
under ASC 310-30 as of December 31, 2016, primarily mortgage loans
acquired from Doral Bank in the first quarter of 2015 and from
Doral Financial in the second quarter of 2014, are excluded and
not considered non-performing due to the application of the
accretion method, under which these loans will accrete interest
income over the remaining life of the loans using estimated cash
flow analysis.

(3)

Amount includes purchased credit impaired loans with individual
delinquencies over 90 days and still accruing with a carrying
value as of December 31, 2016 of approximately $29.0 million,
primarily related to loans acquired from Doral Bank in the first
quarter of 2015 and from Doral Financial in the second quarter of
2014.

Table 10– Non-Performing Assets by Geography

(In thousands)

December 31,

September 30,

December 31,

2016

2016

2015

Puerto Rico:

Non-performing loans held for investment:

Residential mortgage

$

135,863

$

138,147

$

147,975

Commercial mortgage

167,241

176,474

34,917

Commercial and Industrial

141,916

132,180

131,450

Construction

10,227

11,124

11,894

Finance leases

1,335

1,969

2,459

Consumer

21,592

22,213

26,329

Total non-performing loans held for investment

478,174

482,107

355,024

OREO

128,395

129,365

133,121

Other repossessed property

7,217

9,369

12,115

Other assets (1)

21,362

20,393

-

Total non-performing assets, excluding loans held for sale

$

635,148

$

641,234

$

500,260

Non-performing loans held for sale

8,079

8,079

8,135

Total non-performing assets, including loans held for sale (2)

$

643,227

$

649,313

$

508,395

Past-due loans 90 days and still accruing (3)

$

131,783

$

134,611

$

154,915

Virgin Islands:

Non-performing loans held for investment:

Residential mortgage

$

19,860

$

18,250

$

14,228

Commercial mortgage

7,617

9,459

10,073

Commercial and Industrial

4,683

4,836

5,601

Construction

39,625

39,643

42,590

Consumer

452

398

471

Total non-performing loans held for investment

72,237

72,586

72,963

OREO

6,216

6,793

5,458

Other repossessed property

5

-

32

Total non-performing assets, excluding loans held for sale

$

78,458

$

79,379

$

78,453

Non-performing loans held for sale

-

-

-

Total non-performing assets, including loans held for sale

$

78,458

$

79,379

$

78,453

Past-due loans 90 days and still accruing

$

2,133

$

1,910

$

8,173

United States:

Non-performing loans held for investment:

Residential mortgage

$

5,144

$

5,804

$

6,798

Commercial mortgage

3,838

5,516

6,343

Construction

-

-

152

Consumer

701

699

1,493

Total non-performing loans held for investment

9,683

12,019

14,786

OREO

3,070

3,288

8,222

Other repossessed property

78

47

76

Total non-performing assets, excluding loans held for sale

$

12,831

$

15,354

$

23,084

Non-performing loans held for sale

-

-

-

Total non-performing assets, including loans held for sale

$

12,831

$

15,354

$

23,084

Past-due loans 90 days and still accruing

$

1,892

$

1,921

$

109

(1)

Bonds of the Government Development Bank for Puerto Rico ("GDB")
and the Puerto Rico Public Buildings Authority held as part of the
available-for-sale investment securities portfolio with an
amortized cost of $35.6 million, including accrued interest of
$0.9 million, recorded on the Corporation's books at their
aggregate fair value of $20.5 million (September 30, 2016 - $19.5
million).

(2)

Purchased credit impaired loans of $165.8 million accounted for
under ASC 310-30 as of December 31, 2016, primarily mortgage loans
acquired from Doral Bank in the first quarter of 2015 and from
Doral Financial in the second quarter of 2014, are excluded and
not considered non-performing due to the application of the
accretion method, under which these loans will accrete interest
income over the remaining life of the loans using estimated cash
flow analysis.

(3)

Amount includes purchased credit impaired loans with individual
delinquencies over 90 days and still accruing with a carrying
value as of December 31, 2016 of approximately $29.0 million,
primarily related to loans acquired from Doral Bank in the first
quarter of 2015 and from Doral Financial in the second quarter of
2014.

Table 11 – Allowance for Loan and Lease Losses

Quarter Ended

Year Ended

(Dollars in thousands)

December 31,

September 30,

December 30,

December 31,

December 31,

2016

2016

2015

2016

2015

Allowance for loan and lease losses, beginning of period

$

214,070

$

234,454

$

228,966

$

240,710

$

222,395

Provision for loan and lease losses

23,191

(1)

21,503

33,633

86,733

(1)

172,045

(5)

Net (charge-offs) recoveries of loans:

Residential mortgage

(5,487

)

(7,542

)

(4,877

)

(30,680

)

(18,108

)

Commercial mortgage

(4,310

)

(2)

(13,395

)

(1,967

)

(19,638

)

(2)

(49,567

)

(6)

Commercial and Industrial

(9,515

)

(3)

(9,658

)

(2,824

)

(23,890

)

(3)

(29,528

)

(7)

Construction

(1,132

)

121

(4

)

(1,454

)

(2,412

)

(8)

Consumer and finance leases

(11,214

)

(11,413

)

(12,217

)

(46,178

)

(54,115

)

Net charge-offs

(31,658

)

(4)

(41,887

)

(21,889

)

(121,840

)

(4)

(153,730

)

(9)

Allowance for loan and lease losses, end of period

$

205,603

$

214,070

$

240,710

$

205,603

$

240,710

Allowance for loan and lease losses to period end total loans held
for investment

2.31

%

2.42

%

2.64

%

2.31

%

2.64

%

Net charge-offs (annualized) to average loans outstanding during the
period

1.43

%

1.90

%

0.96

%

1.37

%

1.68

%

Net charge-offs (annualized), excluding charge-offs of $4.6 million
and $61.4 million

related to sales of the $16.3 million pool of non-performing
assets and the bulk sale of assets in the fourth quarter of 2016
and second quarter of 2015, respectively, to average loans
outstanding during the period

1.22

%

1.90

%

0.96

%

1.32

%

1.01

%

Provision for loan and lease losses to net charge-offs during the
period

0.73x

0.51x

1.54x

0.71x

1.12x

Provision for loan and lease losses to net charge-offs during the
period, excluding

the impact of the sale of the $16.3 million pool of non-performing
assets completed in the fourth quarter of 2016 and the bulk sale
of assets completed in the second quarter of 2015

0.79x

0.51x

1.54x

0.72x

1.36x

(1)

Includes provision of $1.8 million associated with the sale of the
$16.3 million pool of non-performing assets completed in the
fourth quarter of 2016.

(2)

Includes net charge-offs totaling $3.0 million associated with the
sale of the $16.3 million pool of non-performing assets completed
in the fourth quarter of 2016.

(3)

Includes net charge-offs totaling $1.6 million associated with the
sale of the $16.3 million pool of non-performing assets completed
in the fourth quarter of 2016.

(4)

Includes net charge-offs totaling $4.6 million associated with the
sale of the $16.3 million pool of non-performing assets completed
in the fourth quarter of 2016.

(5)

Includes provision of $46.9 million associated with the bulk sale
of assets completed in the second quarter of 2015.

(6)

Includes net charge-offs totaling $37.6 million associated with
the bulk sale of assets completed in the second quarter of 2015.

(7)

Includes net charge-offs totaling $20.6 million associated with
the bulk sale of assets completed in the second quarter of 2015.

(8)

Includes net charge-offs totaling $3.3 million associated with the
bulk sale of assets completed in the second quarter of 2015.

(9)

Includes net charge-offs totaling $61.4 million associated with
the bulk sale of assets completed in the second quarter of 2015.

Table 12 – Net Charge-Offs to Average Loans

Year Ended

December 31,

December 31,

December 31,

December 31,

December 31,

2016

2015

2014

2013

2012

Residential mortgage

0.93

%

0.55

%

0.85

%

4.77

%

(10)

1.32

%

Commercial mortgage

1.28

%

(1)

3.12

%

(4)

0.84

%

3.44

%

(11)

1.41

%

Commercial and Industrial

1.11

%

(2)

1.32

%

(5)

2.27

%

(8)

3.70

%

(12)

1.25

%

Construction

1.02

%

1.42

%

(6)

2.76

%

15.11

%

(13)

10.49

%

Consumer and finance leases

2.63

%

2.85

%

3.46

%

2.76

%

1.92

%

Total loans

1.37

%

(3)

1.68

%

(7)

1.84

%

(9)

4.07

%

(14)

1.76

%

(1)

Includes net charge-offs totaling $3.0 million associated with the
sale of the $16.3 million pool of non-performing assets in 2016.
The ratio of commercial mortgage net charge-offs to average loans,
excluding charge-offs associated with the sale of the $16.3
million pool of non-performing assets, was 1.09%.

(2)

Includes net charge-offs totaling $1.6 million associated with the
sale of the $16.3 million pool of non-performing assets in 2016.
The ratio of commercial and industrial net charge-offs to average
loans, excluding charge-offs associated with the sale of the $16.3
million pool of non-performing assets, was 1.04%.

(3)

Includes net charge-offs totaling $4.6 million associated with the
sale of the $16.3 million pool of non-performing assets in 2016.
The ratio of total charge-offs to average loans, excluding
charge-offs associated with the sale of the $16.3 million pool of
non-performing assets, was 1.32%.

(4)

Includes net charge-offs totaling $37.6 million associated with
the bulk sale of assets in 2015. The ratio of commercial mortgage
net charge-offs to average loans, excluding charge-offs associated
with the bulk sale of assets, was 0.77%.

(5)

Includes net charge-offs totaling $20.6 million associated with
the bulk sale of assets in 2015. The ratio of commercial and
industrial net charge-offs to average loans, excluding charge-offs
associated with the bulk sale of assets, was 0.40%.

(6)

Includes net charge-offs totaling $3.3 million associated with the
bulk sale of assets in 2015. The ratio of construction net
charge-offs to average loans, excluding charge-offs associated
with the bulk sale of assets, was (0.52)%.

(7)

Includes net charge-offs totaling $61.4 million associated with
the bulk sale of assets in 2015. The ratio of total charge-offs to
average loans, excluding charge-offs associated with the bulk sale
of assets, was 1.01%.

(8)

Includes net charge-offs totaling $6.9 million associated with an
acquisition of mortgage loans from Doral Financial in 2014. The
ratio of commercial and industrial net charge-offs to average
loans, excluding charge-offs associated with the acquisition of
mortgage loans from Doral Financial, was 2.08%.

(9)

Includes net charge-offs totaling $6.9 million associated with the
acquisition of mortgage loans from Doral Financial in 2014. The
ratio of total net charge-offs to average loans, excluding
charge-offs associated with the acquisition of mortgage loans from
Doral Financial, was 1.77%.

(10)

Includes net charge-offs totaling $99.0 million associated with a
bulk sale of non-performing residential assets in 2013. The ratio
of residential mortgage net charge-offs to average loans,
excluding charge-offs associated with the bulk sale of
non-performing residential assets in 2013, was 1.13%.

(11)

Includes net charge-offs totaling $54.6 million associated with a
bulk sale of adversely classified commercial assets and the
transfer of loans to held for sale in 2013. The ratio of
commercial mortgage net charge-offs to average loans, excluding
charge-offs associated with the bulk sale of adversely classified
commercial assets and a transfer of loans to held for sale, was
0.45%.

(12)

Includes net charge-offs totaling $44.7 million associated with
the bulk sale of adversely classified commercial assets in 2013.
The ratio of commercial and industrial net charge-offs to average
loans, excluding charge-offs associated with the bulk sale of
adversely classified commercial assets, was 2.15%.

(13)

Includes net charge-offs totaling $34.2 million associated with
the bulk sale of adversely classified commercial assets and the
transfer of loans to held for sale in 2013. The ratio of
construction loan net charge-offs to average loans, excluding
charge-offs associated with the bulk loan sales and the transfer
of loans to held for sale, was 2.91%.

(14)

Includes net charge-offs totaling $232.4 million associated with
the bulk loan sales and the transfer of loans to held for sale in
2013. The ratio of total net charge-offs to average loans,
excluding charge-offs associated with the bulk loan sales and the
transfer of loans to held for sale, was 1.70%.